Understanding Risk

Risk is the chance that you may not achieve your expected outcomes. All investment decisions involve some form of risk. The level of risk that you choose to accept depends on a number of factors, including:

• your investment time frame,
• the gap between your current and required
  financial position,
• your attitude to risk, and
• your personal circumstances at the time of your investment.

There is a relationship between the amount of risk you wish to take and your likely investment return. Defensive assets such as cash and fixed interest generally carry lower levels of risk, and the returns from these investments will be more predictable than from riskier assets but will usually result in a lower investment return. Effectively, you forego potentially higher returns in exchange for greater certainty.

Growth assets such as property and shares generally carry higher levels of risk, and it's likely that the value of your investment will fluctuate, especially over short and medium term periods. However, growth assets are expected to deliver a higher long term return than defensive assets. When you invest in growth assets, you sacrifice short term certainty in exchange for a higher potential long term return.

When your Infocus Financial Adviser is getting to know you, they will determine a risk profile that reflects your attitude to investing. They will use this profile to create a portfolio that meets your risk/return requirements.

To download an overview of the risk profiles, click the link below.

Focus On Risk Profiles [496kb]